Cancelling fixed-term contracts under the CPA
How a South African consumer can end a fixed-term contract early on 20 business days' notice, and the notice a supplier must give before the term runs out.
By Achekam · · 4 min read · For Running a business businesses in South Africa
Gyms, security companies, cellphone and internet providers, alarm monitoring, school transport, equipment rental: a great deal of South African business runs on fixed-term contracts. The customer signs up for a set period, pays monthly, and the business plans around the income.
The Consumer Protection Act puts limits on that arrangement. A consumer can leave early, and a supplier has to warn the consumer before the term runs out. Businesses that ignore either rule end up with disputes, refunds and complaints they could have avoided. This guide explains both duties, who they do not cover, and how to keep the paperwork that shows you followed them.
Cancelling on 20 business days' notice
The CPA text published on the government's page lets a consumer cancel a fixed-term consumer agreement at any time on 20 business days' written notice. That is section 14 of the Act as originally published; later amendments are not reflected in that text.
"At any time" means the consumer does not need a reason, and does not have to wait for the end of the term. The notice must be in writing, and 20 business days runs on working days, not calendar days.
The section also deals with what the supplier may charge when a consumer leaves early and with the maximum length of these agreements. The text of section 14 of the CPA covers the right to cancel, cancellation charges, the maximum term and renewal notices, and is worth reading in full before you set your own terms.
Telling the consumer before the term ends
The second duty sits with the business. The Act as published requires the supplier to notify the consumer between 40 and 80 business days before the fixed term expires.
That window is the part businesses most often miss. Too early, and the notice is outside it; too late, and the consumer has not had the warning the Act requires. A contract that simply rolls over without that notice invites a dispute later. Work the window out for every contract when it is signed, and diarise it.
A worked example in words
A home alarm company signs a customer to a fixed-term monitoring contract. When the contract is captured, the company works out the date 80 business days before the end of the term and the date 40 business days before it, and schedules its notice to go out between them. Halfway through the term the customer moves house and gives written notice to cancel. The company counts 20 business days from the notice, issues a final invoice for that period, and closes the contract.
Not between juristic persons
The Act as published says section 14 does not apply to transactions between juristic persons. A contract between two companies, or between a company and a trust, falls outside these rules, whatever the size of the buyer.
That is worth separating from a different question. The dtic's booklet on the Act says a business with total annual turnover of less than R2 million is also protected as a consumer under the CPA. But the exclusion in section 14 turns on both parties being juristic persons, so a small company buying a fixed-term service from another company should not assume this section helps it. A sole trader, who is not a juristic person, is in a different position. When a small business is protected by the CPA looks at the wider picture.
The National Consumer Commission says that under section 5 of the CPA it has jurisdiction over every transaction in South Africa and the supply of goods or services in the country, unless exempted, so contracts with individual consumers are squarely within its reach.
Plain and understandable language
How the contract is written matters too. The dtic's booklet says consumers have the right to information and contracts in plain and understandable language. A fixed-term contract that buries the term, the cancellation right or the charges in dense legal wording invites challenge on that ground. State the start date, the term, how to cancel and what cancelling costs in short sentences near the top.
Signed contracts, final invoices and credit notes in Achekam
A fixed-term relationship has three documents that matter: the signed contract, the regular invoices and the final account when it ends.
The contract. In Achekam, any document can be sent for electronic signature with signature and initials fields, signers in order or all at once, an expiry and reminders. The signed PDF and a completion certificate are filed back into Documents, so the agreed terms and the date the customer signed are on record.
Invoices. Customer invoices start as drafts that can be changed or deleted; issuing one takes the next number in the business's sequence and posts it to the ledger as debtors, sales and output VAT. When a consumer cancels, issue the final invoice for the notice period and stop raising further invoices.
Corrections. If an invoice was raised for a period after cancellation took effect, a credit note is issued from that invoice, in full or for chosen lines, and posted to the ledger, with any leftover credit held for the customer.
Fixed-term contract checklist
- Write the term, cancellation right and charges in plain language.
- Have the contract signed and file the signed copy.
- Diarise the 40 to 80 business day notice window at signing.
- Send the expiry notice inside that window and keep proof of it.
- On written cancellation, count 20 business days and issue the final invoice.
- Credit any invoice raised for a period after cancellation.
Most fixed-term disputes are really disputes about dates. Work the dates out when the contract is signed, and keep them where the people sending invoices can see them.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
